Keeping small economies vibrant, by cleverly using blockchain, is becoming big business

We’re interested in structures and mechanisms that give people control over their localities, and make them feel like actors in a script they’ve written themselves. For that reason, we’ve been interested in cryptocurrencies and blockchains over this last year or so. 

Both of these software projects start by tilting at big centralised systems - primarily the money system, but also law. They claim that we can conduct our trades and contracts between ourselves, securely governed by algorithms and code, cutting out the expensive “middlemen” of official banks and lawyers. 

However, it might be safe to say that early poster projects which demonstrate how this decentralisation might work, like Bitcoin, are not the best adverts for it so far. Bitcoin veers between instability/fraud, and becoming a new version of the old gold standard - and at a global, not local level.

But crypto and blockchain as instruments that can super-power communities, through keeping the value of trade local to those places, are showing off the technology much more attractively.

We have already profiled CounterCoin in these pages - where kids get paid in a local currency (flourescent discs) for doing charitable and volunteer acts, and local retailers agree to let them spend this coinage during slow times in the trading day. 

HullCoin - based in the fine city of Hull - takes this to another level. A digital entity (a local not-for-profit company) issues HullCoins to local civic organisations, who then pay their volunteers in this digital currency (there’s an app available for smartphone use).  Civil Society Futures tells what happens next: 

People with Hullcoins can then redeem them at participating retailers across the City in return for discounts on goods and services of between 5 and 50%. The retailers can then choose what to do with the coins, either re-issuing them as employee rewards, to loyal customers as discounts on future purchases. Or they can donate them back to a community group or charity to help stimulate the local economy even more.

As a Guardian report says, the core of this arrangement isn’t the tech, but the way it enables “the creation of spending power from “good deeds”:

The Bristol and Brixton Pounds, for example, ultimately have to be paid for in sterling – even if those pounds stick around in the local economy for longer. There are no such limits with HullCoin. You don’t need money to earn tokens. And by putting issuing power in the hands of community organisations, the project has a good chance of reaching the people who really need it. 

See this BBC film on Hull Coin, read this TechNorth report, and hear a longer documentary on iPlayer, from the excellent World Hacks series.

Does all this sound attractive? A virtuous combination of social and economic values? If so, then you’d not be surprised to hear that bigger players are moving into this community space. 

According to this BBC report, for the last 12 months or so, Liverpool has agreed to trial a new local digital currency, built and owned by an Israeli start-up called Colu.

People spend their own money to get into the digital currency - but once inside, and using their apps, they pay zero transaction charges (saving between 0.5 to 2.0%). How does Colu, as an investor-backed business, make money? When you “cash out”, or convert your Colus back into pounds, they take a commission of 1.5%. 

There is much satisfaction all the way along the chain, from buyer to retailer, seller to local politician. Says Gary Miller, the assistant mayor of Liverpool:

A council like Liverpool could use this to ensure money stays local. We know when people spend money locally with an independent, 65p in the pound stays local. If they spend it with a big global organisation, it will be about 30p instead… I think it's wonderful if a small business can pay its business rates using a digital currency - I'd love that to happen.

A few caveats around this case, though. Colu are evidently a shareholder-driven, networked enterprise, needing to expand into as many sectors as possible. How committed to their localities will they truly be, once they are locked in? 

Their current pitching - with leading behavioural scientist Dan Ariely as their pitchman - is very much attempting to be the toolbox for local digital currencies across the world.

But what is to stop a kind of Uber-like stranglehold on local trading, after a certain point of take-up is exceeded? What happens if things go badly for Colu? In the words of NEF’s Duncan McCann, quoted in the BBC piece:

The big danger is that if no profit is being made, or worse they start making a loss, that they will just cancel the app and all the hard work is lost in an instant. Then it becomes very hard to start another local currency because there is so much bad feeling.

Interestingly, McCann has made his own digital currency proposal in 2015 - a “ScotPound”, run by a future independent Scottish Government, that could provide all the transaction savings previously mentioned. It would be powered by “ScotPay”, which would provide “the world’s first publicly owned, not-for-profit national payment system, enabling Scottish businesses to accept payment for goods and services without being charged fees by banks and global credit card firms”.

All three of these examples - HullCoin, Colu in Liverpool and the ScotPound - raise a common question about these alternative and more localised (or even regional/small-national) money systems. There is a lot of rhetoric about trust being “baked” into these mechanisms at a digital level. Cryptography masks identities, and is in any case distributed across many computers, not centralised to one. 

But in these three examples, there always seems to be one entity (a state, a council, a private company, a social enterprise) that at least kicks the process off, and has - to some degree - governance over and responsibility for it. And who regulates that regulator? 

This is the kind of topic that we believe needs communities coming together regularly, to discuss and imagine better - which is what our “Laboratories” are intended to enable and facilitate. Is this what our sister party in Denmark, Alternativet, means by a "fourth-sector organisation"? (And if you want to get involved, please sign up here). 

Machines in the hands of citizens, rather than the other way round? That feels like a real “Alternative”.